Indonesia plans US$8 billion refineries contract with US firm amid tariffs deal: sources
Jakarta believes the fallout of the lowered tariff rate could boost its GDP growth by 0.5 percentage point
[JAKARTA] Indonesian sovereign wealth fund Danantara plans to sign a US$8 billion engineering, procurement and construction contract with US engineering firm KBR to build 17 modular refineries, according to two sources familiar with the matter and an official economic ministry presentation seen by Reuters.
The contract is part of last week’s trade pact between Indonesia and the United States that led to a reduction in the threatened US proposed tariff rate to 19 per cent from 32 per cent.
Indonesian Economic Minister Airlangga Hartarto, the chief negotiator of the deal, disclosed the modular refinery plan during a closed-door briefing to Indonesian business leaders on Monday (Jul 21) evening. Two sources confirmed the planned deal was mentioned in a presentation that Reuters also reviewed.
Danantara and KBR, formerly known as Kellogg Brown & Root, did not immediately respond to requests for comment. No further details were given on the proposed agreement.
While some details of the trade deal between the US and Indonesia have been made public, such as increased purchases of US energy, agriculture and commercial aircraft, the proposed contract for refineries has not previously been reported.
Danantara controls over US$900 billion worth of assets, and is part of an ambitious plan to grow the US$1.5 trillion economy at a rate of 8 per cent, compared to the current 5 per cent.
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Also mentioned in the presentation was a potential US$2 billion “strategic” investment to develop blue ammonia in US state Louisiana, by Indonesian chemical and textile group Indorama. But, the presentation added, the project needs tax credits to become feasible.
US President Donald Trump said last week that Indonesia would buy 50 aircraft from Boeing as part of the deal.
The presentation put the total value of aviation sector deals with American companies at US$14.4 billion.
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The potential deals between Indonesia and US could reach US$34 billion, the presentation showed, underscoring the all-out push by Jakarta to become one of the first countries in the world to clinch a deal with Washington.
“Indonesia welcomes more US business and investment to create jobs, technology transfer and to support national priority developments,” the presentation said, adding that the comparatively lower tariff for Indonesia could make it a site for regional industry relocations.
The presentation also said that Jakarta believes the fallout of the lowered tariff rate could boost its GDP growth by 0.5 percentage point.
Apple and General Electric were also mentioned in the presentation as US firms that will benefit from relaxed local content requirements for US information and communication technology goods, as well as US medical devices.
Indonesia’s local content rules make it mandatory to have a certain percentage of products made in-country, and have been previously seen as too stringent by some foreign businesses looking to enter the world’s fourth-most populous country.
The South-east Asian country banned iPhone 16 sales last year as Apple failed to meet composition requirements. The ban was lifted only following the company’s more than US$300 million investment plan.
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